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US Rescue package brings relief − also to CEE
Mon, Sep 22 2008, 08:02 GMT
by Danske Research Team
The indications are that during the weekend we will see a large rescue package for the US financial sector. This undoubtedly provides some very welcome relief to the global financial markets. The initial market response has been very positive with global stock markets rebounding. This reaction is likely to be reflected in central and eastern Europe as well.
We see the biggest beneficiaries to be the most "leveraged" and high-beta markets in the region - such as Turkey, Rumania, Bulgaria and the Baltic States. We are also seeing this relief spreading to the heavily beaten Russian markets - on Friday morning the Russian stock market was initially up by more than 25%!
So overall we see higher equity prices, lower rates and yields and strong currencies in most markets in the region - in the short-run. as the markets celebrate the expected US financial rescue package.
It is of course still an open question as to exactly how this package will actually look, but for the time being it is safe to say that this is helpful for Emerging Markets sentiment. Looking further ahead we are still very much in a de-leveraging "mode" in the global economy and we certainly do not believe that everything is now fine and well. The fact remains that most economies in central and eastern Europe have become far too leveraged in recent years and that these countries are likely to go through a protracted period of deleveraging. We therefore maintain our relatively bearish growth and market outlook for those countries with large external imbalances such as Turkey, the Baltic States, Bulgaria, Romania and Hungary.
Published on Mon, Sep 22 2008, 08:06 GMT
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